Retail traders are increasingly shifting into gold, lured by the asset's versatility, high liquidity and the accessibility of smaller futures contracts.
"[Gold] is as good as gold… It's probably the most widely known wealth measure throughout the world," said JJ Kinahan, CEO of IG Americas and President of tastytrade, when asked why the precious metal is important for retail investors. Helping along is the advent of a highly liquid, 24-hour market that's further enhancing gold's appeal as a trusted hedge, no matter where traders are located.
"Liquidity, liquidity, liquidity – it’s what we talk about all the time when we’re educating retail clients,” said Kinahan. “Go to places where you can be in and out whenever you want.”
Kinahan recently joined Jin Hennig, global head of Metals at CME Group, for a conversation around gold and the retail investor where they discussed the reasons why these traders are turning to the precious metal.
Crypto and Gold
While sometimes seen as rival products, Kinahan sees gold and crypto as complementary overall, noting that they are similar in that some traders use either product as a longer-term holding while others trade in and out of them more quickly.
“As both these products continue to progress, the interest in both of them is very strong,” says Kinahan. “I really do see a day where you may have [trading pairs of] bitcoin versus gold, just as you see gold versus silver,” adding that the similarities between bitcoin and gold can make them more, not less, tradable.
Rising Micro Futures Adoption
As gold draws investors from diverse regions and time zones, Hennig asks if the phenomenon is giving rise to a particular trading strategy. While it’s not something Kinahan has observed, he is seeing some differences among younger clients.
“I think what you’re seeing in a lot of younger clients is a), a hunger for the smaller products; and b), an appetite to say 'ok, I am younger [so] maybe I will take a little bit more risk,' not crazy risk, but really thoughtful risk," added Kinahan.
As smaller-sized products grow in popularity, Micro Gold (MGC) futures at CME Group are also gaining traction – the beginning of Q4 saw a robust average daily volume (ADV) of 110,453 contracts. Additionally, the January 2025 launch of 1-Ounce Gold futures (representing just 1/10 the size of a MGC futures contract) aims to make the market even more accessible for gold traders.
With smaller-sized contracts, "people can tailor their investment needs to their pocket books" and participate in a product they may not have been able to afford before, according to Kinahan. “The person who is trading smaller sums today hopefully has success throughout their career and becomes the bigger trader over time."
Watch the full conversation in the video above.
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